Impact of Capital Markets on Business
Capital Market is now becoming more global and the competition among the institutions. Financing through capital market has become now more easier as compared to financing through banks. It provides a wide range of services that are related to financial investment. It includes the stock market, commodities exchange where debt and equity securities can be bought or sold. The primary purpose of capital market is to raise the funds and providing money to those communities where there is deficiency or need for investment.
Types of Capital Market :
Primary Market : It refers to the market where new stocks or securities are sold. In the primary market, there are private and public companies the offer debt or equity securities in order to expand their business, modernization and so on. The transaction is conducted between the issuer and the buyer.
Modes of Issuing Securities in Primary Market
Right Issue
Initial Public Offering (IPO)
Preferential Issue
Secondary Market : It refers to the market where previously issued financial stocks or securities are bought or sold. Once the IPO is done and the stock is listed, they are traded under secondary market. It is used for trading stocks or securities between persons and other entities.
The main difference is that in primary market, the securities can only bought from the company through IPO whereas in secondary market, one can purchase the securities from other investor.
Modes of Issuing Securities in Secondary Market
Over the Counter (OTC)
Third and Fourth Market
How does Capital Markets help in the Business Growth
The capital market is a well organized and highly specialized market, essential agents that drive any economy/business in order to achieve economic growth and development. Here below are some points that describes the benefits of capital market:
Mobilization of Savings : Capital Market is the good channel to move the idle savings to the most productive units in the economy. It mobilizes the funds for further investments in the productive channel of an economy.
Increase Productivity : With the growth of technology, capital has become more important. More goods can be produced with the help of capital. It has been observed that developed countries have the greater productivity due to extensive use of capital.
Increase in Economic Development: Economic Development of any country is not possible without the usage of machinery, production of agricultural tools, the building of dams etc which all are covered under capital. Because of the strategic role in raising productivity, capital occupies a central position in the process of economic development.
Creating Employment Opportunities: It is the another important factor which helps in the growth of an economy. With the increase of capital formation in an economy, the employment also increases. In the developing countries, the stock of capital has not been growing as fast enough so that it covers up the growth of population. That is why there is a huge amount of unemployment in both rural and urban areas.
If you are interested in investing for the business growth, there are various capital market advisory firms available that will guide you to invest in right time, right place and with the right person but while hiring a firm, always keep in mind the reputation of the firm you are choosing and long-term commitments. The team of capital market advisory keep a track record of helping its clients by raising capital from financial sources in order to achieve economic development.
